Core Insights - Federated Hermes, Inc. (FHI) shares reached an all-time high of $56.68, closing at $54.88, reflecting strong investor confidence due to growth in assets under management (AUM) and robust strategic positioning [1][8] Performance Overview - Over the last six months, FHI stock increased by 5.7%, while the industry declined by 12.9%, outperforming peers like Ares Management Corporation (ARES) and T. Rowe Price Group (TROW) [2] Growth Drivers - **Strategic Business Expansion**: FHI is accelerating growth through strategic acquisitions, including an 80% stake in FCP Fund Manager, L.P. to enhance its private markets capabilities [6] - **Acquisition History**: The company has made several acquisitions, such as C.W. Henderson & Associates, Inc. in 2022, to diversify revenue streams and strengthen its global footprint [7] - **AUM Growth**: FHI's AUM grew at a compound annual growth rate (CAGR) of 7.8% over five years, reaching $902.6 billion by December 2025, driven by record money market assets and increased equity holdings [10] - **Money Market Strength**: Money market assets grew at a five-year CAGR of 10.2%, providing a broader range of fund options and favorable market conditions for money market strategies [11] Financial Stability - **Robust Balance Sheet**: As of December 31, 2025, FHI had long-term debt of $348.4 million and cash and investments totaling $724.3 million, indicating strong liquidity and manageable debt levels [12] - **Capital Distribution**: The company has a history of rewarding shareholders through share buybacks and dividends, with a recent 9.7% increase in its quarterly dividend to 34 cents per share [14] Challenges - **Rising Operating Expenses**: Operating expenses have a five-year CAGR of 4.5%, primarily due to intangible asset-related costs, which could increase further with new hires [15] - **Revenue Concentration Risk**: Investment advisory fees account for 65% of total revenues, making the company vulnerable to fluctuations in market conditions [18] Earnings and Valuation - **Earnings Estimates**: The Zacks Consensus Estimate indicates a 1.8% rise in 2026 earnings and a 10.9% rise in 2027 earnings, with upward revisions over the past month [19] - **Valuation Metrics**: FHI is trading at a trailing P/E ratio of 10.66X, lower than the industry average of 13.96X, indicating it may be undervalued compared to peers [21][23] Investment Consideration - The strong rally in FHI shares reflects confidence in its strategic growth initiatives and financial position, with ongoing expansion and a solid balance sheet enhancing shareholder value [25]

Industry Overview - The Zacks Investment Management industry is under pressure from rising technology and AI-related expenses, which are expected to impact near-term profitability despite potential long-term efficiency gains [1][4] - The industry is characterized by companies managing securities and funds for clients, earning revenue through service fees or commissions [3] Key Themes Influencing the Industry - Rising Expenses: Increased technology and AI-related costs are expected to hurt profits in the near term, alongside elevated compliance costs due to regulatory requirements [4] - Demand for Passive Investing: A shift towards low-cost passive funds has compressed fees and intensified competition, leading to reduced revenue per dollar of assets and limiting earnings growth [5][6] - Mergers and Partnerships: Firms are pursuing mergers and partnerships to achieve scale, cut costs, and diversify offerings in response to competitive pressures [7][8] Performance Metrics - The Zacks Investment Management industry has underperformed the S&P 500 Index, with a collective gain of 8.4% over the past two years compared to 41.6% for the S&P 500 [13] - The industry's current Zacks Industry Rank is 137, placing it in the bottom 44% of over 250 Zacks industries, indicating a bleak earnings outlook [9][10][11] Valuation Insights - The industry has a trailing 12-month price-to-tangible book ratio (P/TB) of 4.07X, significantly lower than the S&P 500's 11.78X, indicating a discount compared to the broader market [17][19] - Compared to the broader Finance sector, the Zacks Investment Management industry is trading at a discount, with the Finance sector's P/TB at 6.06X [19] Company Highlights Ameriprise Financial (AMP) - As of December 31, 2025, Ameriprise had total assets under management of $1.7 trillion, with a CAGR of 9.2% in net revenues over the past five years [24][25] - The company has been restructuring its business and focusing on core competencies to improve market share [26] - Ameriprise shares have gained 4.2% in the past three months, with a Zacks Rank of 2 (Buy) [28] SEI Investments Company (SEIC) - SEIC administered $1.9 trillion in assets as of December 31, 2025, with a CAGR of 9.9% in total assets under management over the past five years [31][32] - The company has made strategic acquisitions to enhance its business capabilities, including the recent acquisition of Stratos for $440.8 million [35][36] - SEIC shares have gained 0.7% in the past three months, also carrying a Zacks Rank of 2 [36] Federated Hermes, Inc. (FHI) - Federated Hermes had $902.6 billion in assets under management as of December 31, 2025, with a CAGR of 7.8% over the past five years [38][39] - The company has been actively seeking alliances and acquisitions to expand its global presence [39] - FHI shares have gained 14.2% in the past three months, maintaining a Zacks Rank of 2 [42]

Core Insights - The focus for income investors is generating consistent cash flow from liquid investments, particularly through dividends [1][2] Company Overview - Federated Hermes (FHI), headquartered in Pittsburgh, has experienced a price change of 6.47% this year and currently pays a dividend of $0.34 per share, resulting in a dividend yield of 2.45% [3] - The company's dividend yield is lower than the Financial - Investment Management industry's yield of 2.71% and the S&P 500's yield of 1.39% [3] Dividend Analysis - Federated Hermes has an annualized dividend of $1.36, which is a 2.3% increase from the previous year [4] - Over the past five years, the company has increased its dividend three times, averaging an annual increase of 0.78% [4] - The current payout ratio is 27%, indicating that the company pays out 27% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for Federated Hermes for 2026 is $5.07 per share, reflecting a year-over-year growth rate of 1.81% [5] Investment Considerations - Dividends are favored by investors as they enhance stock investing profits, reduce overall portfolio risk, and offer tax advantages [5] - High-growth firms and tech start-ups typically do not provide dividends, while established companies with secure profits are preferred for dividend investments [6] - Federated Hermes is positioned as an attractive dividend investment opportunity, supported by a strong Zacks Rank of 2 (Buy) [6]

Core Viewpoint - Federated Hermes has shown strong stock performance, reaching a 52-week high and outperforming its sector and industry peers in terms of year-to-date gains [1][2]. Performance Summary - The stock has increased by 1.7% over the past month and 4.3% since the beginning of the year, while the Zacks Finance sector has remained flat and the Zacks Financial - Investment Management industry has declined by 8.9% [1]. - The company has consistently beaten earnings estimates, with the latest EPS reported at $1.39 against a consensus estimate of $1.2, and revenue exceeding expectations by 2.72% [2]. Earnings Forecast - For the current fiscal year, Federated Hermes is projected to achieve earnings of $5.07 per share on revenues of $1.95 billion, reflecting a 1.81% increase in EPS and an 8.34% increase in revenues [3]. - The next fiscal year is expected to see earnings rise to $5.63 per share on revenues of $2.04 billion, indicating a year-over-year growth of 10.98% in EPS and 4.5% in revenues [3]. Valuation Metrics - The stock trades at a valuation of 10.7 times the current fiscal year EPS estimates, slightly below the peer industry average of 10.9 times [7]. - On a trailing cash flow basis, it trades at 15.4 times compared to the peer group's average of 11.9 times, with a PEG ratio of 0.53, positioning it favorably for value investors [7]. Zacks Rank and Style Scores - Federated Hermes holds a Zacks Rank of 2 (Buy), supported by rising earnings estimates, which is favorable for potential investors [8]. - The company has a Value Score of A, a Growth Score of D, and a Momentum Score of B, resulting in a combined VGM Score of B, indicating a solid investment opportunity [6][8].

Core Viewpoint - Federated Hermes, Inc. announces the promotion of Mark Weiss to head of the Prime Liquidity Group, effective July 1, 2026, following the retirement of Paige Wilhelm [1][4]. Group 1: Leadership Changes - Mark Weiss, with over 28 years of experience in trading, research, and portfolio management, will oversee portfolio management and research for prime money market investment strategies, which currently manage $242.7 billion in assets [2][3]. - Paige Wilhelm, who has been with Federated Hermes for 41 years, is retiring after significantly contributing to the growth of the firm's prime funds [4]. Group 2: Financial Overview - As of December 31, 2025, Federated Hermes manages $902.6 billion in total assets, with $682.6 billion specifically in money market assets [5][4]. - The investment management team consists of 34 professionals, averaging 22 years of industry experience, contributing to the firm's strong reputation in credit analysis and liquidity management [4].

Core Viewpoint - The article emphasizes the importance of identifying value stocks in the Asian market, particularly those listed in Hong Kong, that exhibit significant discrepancies between their market price and intrinsic value, focusing on deep value balance sheet bargains and wide moat stocks [1] Group 1: Investment Strategy - The research service Asia Value & Moat Stocks targets value investors looking for stocks with a substantial gap between price and intrinsic value [1] - The service specializes in deep value balance sheet bargains, such as net cash stocks, net-nets, low price-to-book (P/B) stocks, and sum-of-the-parts discounts [1] - It also focuses on wide moat stocks, which are characterized by strong earnings power at discounted prices, including high-quality businesses and hidden champions [1] Group 2: Market Focus - The primary focus of the investment group is on the Hong Kong market, leveraging over a decade of experience in Asian equity markets [1] - The group provides a range of watch lists with monthly updates to assist investors in identifying potential investment opportunities [1]

Core Insights - The company reported a record $903 billion in assets under management at the end of 2025, driven by growth in money market and equity strategies [3][7] - Equity assets increased by $3.2 billion, or 3%, in Q4 2025, with net equity sales of $1.5 billion for the quarter and $4.6 billion for the full year [1][4] - Money market assets rose by $30 billion in 2025 to $683 billion, with money market mutual fund assets reaching a record $508 billion [2][7] Asset Management Performance - The firm experienced substantial improvements in equity flows, particularly from MDT strategies, which achieved record gross sales of $19.1 billion and net sales of $13 billion in 2025 [6][8] - Fixed income assets ended the year at $100 billion, down $1.7 billion from the prior quarter, with net redemptions of $2.8 billion in Q4 [11][12] - Alternatives and private markets saw slight asset increases and positive net sales, with the MDT Market Neutral Fund contributing $149 million in net sales [13] Revenue and Financials - Fourth-quarter revenue increased by $13.4 million, or 3%, compared to the prior quarter, driven by higher money market and equity assets [17] - Operating expenses rose by $7.3 million, or 2%, primarily due to increased distribution expenses [19] - The effective tax rate was reported at 24.4%, with an estimated range of 25% to 28% for 2026 [20] Strategic Initiatives - The company is advancing tokenization and digital asset initiatives, including partnerships for tokenized U.S. money market funds [5][18] - Management highlighted the launch of the MDT U.S. Equity UCITS Fund, which reported over $500 million in net sales since inception [8] - The firm is also marketing a Global Private Equity Co-Invest Fund and a new European Real Estate Debt Fund [14]

Company Overview - Federated Hermes (FHI) is headquartered in Pittsburgh and operates in the Finance sector, specifically as one of the largest managers of money market funds [3] - The stock has experienced a price change of 1.84% since the beginning of the year [3] Dividend Information - Federated Hermes currently pays a dividend of $0.34 per share, resulting in a dividend yield of 2.56%, which is slightly below the Financial - Investment Management industry's yield of 2.71% and significantly above the S&P 500's yield of 1.33% [3] - The company's annualized dividend of $1.36 has increased by 2.3% from the previous year, with an average annual increase of 0.78% over the last five years [4] - The current payout ratio for Federated Hermes is 29%, indicating that it pays out 29% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for Federated Hermes's earnings per share for 2026 is projected to be $5.02, reflecting a year-over-year growth rate of 0.80% [5] Investment Considerations - Federated Hermes is considered a compelling investment opportunity due to its strong dividend profile, especially in a market where high-yielding stocks may face challenges during rising interest rates [6] - The stock currently holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [6]

Core Insights - Federated Hermes, Inc. (FHI) reported fourth-quarter 2025 earnings per share of $1.39, exceeding the Zacks Consensus Estimate of $1.20, marking a 33.6% increase from the previous year [1][10] - The company achieved a record level of assets under management (AUM) at $902.6 billion, driven by strong growth in money-market and equity assets [7][10] Financial Performance - Net income for the fourth quarter was $107 million, reflecting a 26.3% increase year over year [2][10] - Total revenues rose 13.7% year over year to $482.8 million, surpassing the Zacks Consensus Estimate by 2.7% [4][10] - For the full year 2025, earnings per share were $5.13, exceeding the Zacks Consensus Estimate of $4.95, and net income increased by 50.3% to $403.3 million [3] Revenue and Expense Breakdown - Operating revenue for 2025 was $1.8 billion, exceeding the Zacks Consensus Estimate of $1.79 billion, with a year-over-year increase of 10.3% [4] - Quarterly net investment advisory fees increased by 8.9% year over year to $313.9 million [4] - Net other service fees grew significantly by 61.3% year over year to $59.1 million, while net administrative service fees rose by 10.1% to $109.7 million [5] Asset Management and Growth - Average managed assets totaled $873.7 billion, up 8.6% year over year [8] - The company reported record money-market assets of $682.6 billion, an increase of 8.3% year over year, and equity assets rose by 23.3% to $97.9 billion [7][10] Capital Management - The company repurchased 1,566,901 shares of its class B common stock during the reported quarter [11] - A dividend of 34 cents per share was declared, payable on February 13, 2026, to shareholders of record as of February 6, 2026 [11] Balance Sheet Strength - As of December 31, 2025, cash and other investments totaled $724.3 million, while total long-term debt was $348.4 million, indicating a stable balance sheet [6]

Financial Data and Key Metrics Changes - The company ended 2025 with a record asset under management of $903 billion, an increase driven by gains in money market and equity strategies [3] - Total revenue for Q4 increased by $13.4 million, or 3%, primarily due to higher money market assets and equity assets [14] - The effective tax rate was 24.4%, with an estimated range of 25%-28% for 2026 [15] Business Line Data and Key Metrics Changes - Equity assets increased by $3.2 billion or 3% from the prior quarter, with Q4 net equity sales of $1.5 billion [3] - Fixed income assets decreased by $1.7 billion to $100 billion, with Q4 net redemptions of $2.8 billion [5][6] - Money market fund assets reached a record high of $508 billion, increasing by $16 billion or 3% in Q4 [10] Market Data and Key Metrics Changes - The company’s money market fund market share was approximately 7% at the end of 2025, down from 7.1% at the end of Q3 [10] - The company reported strong demand for its MDT U.S. Equity UCITS Fund, with over $500 million in net sales since its launch [5] Company Strategy and Development Direction - The company plans to open a Hong Kong office to capitalize on the growing wealth market in the Asia Pacific region [9] - The acquisition of FCP is expected to close in the first half of 2026, adding U.S. multifamily housing expertise to the company's capabilities [8] - The company is advancing digital asset initiatives, including partnerships for tokenized money market funds [11][12] Management's Comments on Operating Environment and Future Outlook - Management expects a positive environment for money market funds, driven by attractive yields compared to alternatives [10] - The outlook for 2026 includes expectations of one rate cut by 25 basis points, with a terminal rate above 3% [36] - Management believes there is no disruption expected from the succession planning of key portfolio managers [21] Other Important Information - The company has a robust pipeline of tokenization projects, including efforts for a Genius-compliant money market fund [13] - The company raised $780 million for its European Direct Lending Fund III, indicating strong interest in private market strategies [7] Q&A Session Summary Question: Distribution costs have increased significantly; what is the reason? - Management explained that the increase in distribution costs was due to a significant amount of assets coming into share classes with higher distribution expenses [20] Question: What is the transition plan for retiring portfolio managers? - Management stated that succession planning has been in place for many years, with replacements being experienced individuals from within the company [21] Question: What is the demand for tokenization from clients? - Management noted that demand is not as robust as expected, with clients currently satisfied with existing products [25] Question: What is the outlook for money market fund flows in the first half of the year? - Management indicated that January is typically a month of outflows, with growth expected to pick up in the second half of the year [51] Question: What is the potential for money market roll-ups? - Management stated that the potential for roll-ups depends on the owners of other money funds and the regulatory environment [91]